Are you wondering what your 2025 Social Security monthly benefit will be? All Social Security beneficiaries receive the same COLA percentage increase at the start of the year, but recipients in states with lower monthly SS benefits will see the lowest increases in their checks compared to other states. How can this be if everyone receives the same raise? There isn't one answer that explains why, so let's dig in.
Social Security benefits are based on lifetime income and the age you claim your benefits. Ultimately, how much you get depends on the Social Security benefits formula. If you want to ensure you receive the biggest benefit possible, consider waiting to claim your Social Security benefits. You will receive an extra 2/3 of 1% for each month you delay after your birthday month, adding up to 8% for each full year you wait until age 70. If you defer claiming benefits until age 70, you'd receive 132% of your full retirement benefit.
What is the Social Security benefits formula?
Social Security benefits are computed using average indexed monthly earnings (AIME)." This is your average monthly earnings over your 35 highest-earning years, adjusted for inflation. Social Security uses the Average Wage Index (AWI) to adjust your wages for inflation, ensuring that only those years where you earn the most are used to calculate your benefit. The Social Security Administration (SSA) applies a formula to this average to compute the primary insurance amount (PIA). The PIA number is the basis for the benefits that are paid to an individual.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
That is where we will stop before this turns into a math lesson instead of an explanation of why retirees in some states will see the lowest COLA increases. If you are interested in learning how to estimate your Social Security benefits, use these six steps to understand how your benefits are determined and how much you'll receive.
The important takeaway here is that your earnings play a huge role in determining what your Social Security monthly benefits will be when you retire.
Why retirees in some states receive lower monthly benefits and smaller COLA increases
The SSA publishes the Annual Statistical Supplement to the Social Security Bulletin that includes extensive data about the program, payment amounts, and demographics of recipients. The data used here are from the 2023 bulletin, showing the distribution of retired-worker beneficiaries by monthly benefit by state as of December 2022. The 2022 figures are the most-recent final annual data available. While these data don't reflect either the 2023 or 2024 COLA increases, they are useful in illustrating how benefit amounts impact COLA increases overall.
Retired workers in the 10 states below would receive the smallest cost-of-living adjustments (COLAs) in terms of dollars. That is the case because they receive the smallest median Social Security benefits, and a COLA increase is based on the individual recipient’s monthly benefit. All retirees will see the same percentage change in their checks in 2025 — an increase of 2.5%. However, the average beneficiary in some states will receive less than in others. For example, the average beneficiary in Mississippi will see an annual bump on a dollar basis of $483 (or $40.25 monthly), which is $122 less than the average beneficiary in New Jersey, who will see an annual increase of $605 (or $50.40 monthly).
Where a retired worker chooses to live has no direct impact on their Social Security benefit, but it does impact employment opportunities, and pay scale which are factors that will impact your lifetime earnings and the size of your Social Security check.
The median annual salary for all Americans is $60,580 or $1,165 a month, according to the Bureau of Labor Statistics (BLS) Usual Weekly Earnings Of Wage And Salary Workers Q3.
| States | Average annual salary | Average hourly wage |
|---|---|---|
| Lowest | Row 0 - Cell 1 | Row 0 - Cell 2 |
| Mississippi | $45,180 | $21.72 |
| Arkansas | $48,570 | $23.35 |
| West Virginia | $49,170 | $23.64 |
| Highest | Row 4 - Cell 1 | Row 4 - Cell 2 |
| Massachusetts | $76,600 | $36.83 |
| New York | $74,870 | $36.00 |
| California | $73,220 | $35.20 |
While Mississippi, Arkansas and West Virginia have the lowest average annual salaries in the US., Massachusetts, New York and California have the highest average salaries, according to Forbes. The difference between the annual salaries in West Virginia and Massachusetts is $31,420. That means folks in West Virginia, on average, earn almost 40% less than their counterparts in Massachusetts.
To determine your benefit, the SSA calculates your average indexed monthly earnings during the 35 years in which you earned the most. This results in beneficiaries with lower lifetime earning receiving smaller lifetime benefits and annual COLA increases.
| State | Median benefit | Monthly COLA 2.5% increase | Annual COLA 2.5% increase | Median monthly benefit with 2.5% COLA |
|---|---|---|---|---|
| 10 states with smallest monthly benefits | Row 0 - Cell 1 | Row 0 - Cell 2 | Row 0 - Cell 3 | Row 0 - Cell 4 |
| Mississippi | $1,610.90 | $40.27 | $483 | $1,651.17 |
| Louisiana | $1,611.40 | $40.28 | $483 | $1651.69 |
| District of Columbia | $1,613.00 | $40.33 | $484 | $1,653.33 |
| New Mexico | $1,629.90 | $40.75 | $489 | $1670.65 |
| Arkansas | $1,651.90 | $41.30 | $495 | $1,693.20 |
| Alaska | $1,659.90 | $41.50 | $498 | $1,701.49 |
| Maine | $1,665.90 | $41.65 | $500 | $1,707,55 |
| Montana | $1,680.00 | $42.05 | $504 | $1,722 |
| Kentucky | $1,681.90 | $42.05 | $505 | $1,724.95 |
| South Dakota | $1,706.00 | $42.65 | $512 | $1,748.65 |
| Row 11 - Cell 0 | Row 11 - Cell 1 | Row 11 - Cell 2 | Row 11 - Cell 3 | Row 11 - Cell 4 |
| 5 states with largest monthly benefits | Median benefit | Monthly COLA 2.5% increase | Annual COLA 2.5% increase | Median monthly benefit with 2.5% COLA |
| New Jersey | $2,015.90 | $50.40 | $605 | $2,066.30 |
| Connecticut | $1,996.00 | $49.92 | $599 | $2,045.92 |
| Delaware | 1,978.90 | $49.47 | $594 | $2,028.37 |
| New Hampshire | $1,945.90 | $48.65 | $584 | $1,994.55 |
| Michigan | $1,931.00 | $48.27 | $579 | $1979.27 |
The data used in the table is from Annual Statistical Supplement, 2023, Table 5.J6.
Related Content
-
Quiz: Do You Really Know How Social Security Benefits Are Taxed?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
Are You Ready for 65? The Medicare Initial Enrollment Period QuizQuiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your BudgetThree steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
Are You Ready for 65? The Medicare Initial Enrollment Period Quiz
Quiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your Budget
Three steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
Giving Tuesday Is Just the Start: An Expert Guide to Keeping Your Charitable Giving Momentum Going All YearInstead of treating charity like a year-end rush for tax breaks, consider using smart tools like DAFs and recurring grants for maximum impact all the year.
-
Uber Takes Aim at the Bottom Lines of Billboard Personal Injury LawyersUber has filed lawsuits and proposed a ballot initiative, in California, to curb settlements it claims are falsely inflated by some personal injury lawyers.
-
6 Jimmy Buffett Lyrics Every Retiree Should Live ByNo, it's not just Parrotheads who can learn something from the legendary rocker.
-
11 Cities With the Cheapest Groceries in the USIf you live in one of these 11 cities, you're paying less than the rest of the country to keep your fridge stocked.
-
A Financial Adviser's Health Journey Shows How the 'Pink Tax' Costs WomenFact: Women pay significantly more for health care over their lifetimes. But there are some things we can do to protect our health and our financial security.
-
Giving Tuesday 2025: 'Every Small Act Makes a Major Difference'GivingTuesday encourages generosity in any form, from donating to charity to helping your neighbors.
